IPPC Report Drives Home Need to Spend Carbon Tax Dollars Wisely

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IPPC Report Drives Home Need to Spend Carbon Tax Dollars Wisely


The world’s most authoritative voice on climate science, the Intergovernmental Panel on Climate Change (IPCC), released a report on October 8 on what it means to limit global climate change to 1.5 ⁰C, and the consequences of missing this target, a target that Canada not only endorsed, but fought for at the 2015 Paris Climate Summit.

The report states risks associated with global warming of more than 1.5⁰C as a rise in sea level, increased impacts on biodiversity and ecosystems, including species loss and extinction, as well as increased risks to health, livelihoods, food security, water supply, and economic growth.

The bottom line is that any hope for a safe climate hinges on using trillions of dollars around the globe to invest wisely in carbon reduction, clean energy, and energy efficiency programs. This includes wisely investing the billions of dollars being collected here in Alberta through the Carbon Tax.

Is Alberta doing its part?

The argument can be made that some of our carbon tax dollars have been put towards worthwhile programs that will help move us towards a low carbon future. But, there are some allocations of funds that need to be re-evaluated.

Alberta’s Cap on Regulated Electricity Prices

During a short four-month period this year, $35 million from the Carbon Tax was used to subsidize the Regulated Rate providers in Alberta, under Bill 16: An Act to Cap Regulated Electricity Rates.

The money was used to subsidize the retail price at 6.8 cents/kWh ONLY for customers on the government’s Regulated Rate Option (RRO). The subsidy protects the margins of the regulated utilities. This wasn’t a cap, it was a subsidy paid to the regulated utilities to protect their margins.

This is $35 million that could have been more effectively used to further invest in carbon reduction programs.

This subsidy was mismanaged in that each utility was paid a different amount. The more inefficient or lax the utility was in buying energy to meet their load requirements in retailing to RRO customers, then the higher the subsidy paid was to ensure that the utilities’ historical margins were kept whole. On average here are the numbers for what was paid to each provider:

· EPCOR was subsidized 1.1 cents/kWh

· Direct Energy received 1.3 cents/kWh

· ENMAX was paid 2.1 cents/kWh

Per customer, ENMAX was paid almost twice as much per kWh than EPCOR. Why? Just because they overpaid for energy, they shouldn’t be rewarded. Each utility has an energy price setting plan that is approved by the Alberta Utilities Commission (AUC). Do you think EPCOR feels cheated? It is possible that they are applying to be on the same pricing formula that ENMAX has been awarded. Maybe the AUC should roll back ENMAX’s rates so that everyone in the province is treated fairly and equally.

A few pennies, doesn’t sound like much, does it? When you consider that EPCOR received $17 million, ENMAX, which has a smaller customer base, added $9 million to their balance sheet, and Direct Energy took in almost $5 million, it really starts to add up. The payment formula gets even more wonky, in that for farming cooperatives and other smaller communities offering a regulated rate were paid a premium of 10% on top of the average of what the big incumbents received. Just because they were smaller? Why should they get more?

Everyone has the same option of buying off of the power pool at the same price. Paying a 10% premium to the rural farming community doesn’t sound like solid economics.

These numbers were for just four months of subsidies. The current legislation is scheduled to last until 2021. Another 40 months to go and an estimated $700 million that will be paid out. Just think what you could do with a few hundred million dollars. The utilities do not need to be subsidized and this was not the original intent of imposing a tax on carbon.

It is time to get serious, because the risk of not investing in carbon reduction programs is too high. It is time to stop supporting the profit margins of the big regulated utilities and use our carbon tax dollars to address climate change head on.

What we are risking if world leaders do not do something tangible, is the possibility of even stronger storms devastating coastal communities, rising seas threatening small island nations, an increased number of fires blazing through the forests of Western Canada, heatwaves, and much more. The recent storm in Florida is just one small example of what is happening, and when these disasters come, indigenous peoples and vulnerable communities in the global south will be hit the hardest.

We need spend our Carbon Tax dollars wisely to ensure the future health of our one and only home.

Want to do your part for the environment? NewGen Energy provides an opportunity for customers to green all or a portion of their electricity consumption. It is simple and affordable. For an average home that uses 800 kWh/month, greening 30% of your electricity consumption would only cost about $0.13 a day. That’s less than $4 a month.

The best part? Choosing NewGen Energy for your electricity and natural gas needs means you are supporting a 100% locally owned and operated business, meaning your money stays in the local community. We don’t outsource jobs and we offer competitive fixed rates under the RRO cap of 6.8 cents/kWh and we don’t need to be subsidized.